Enterprise Resource Planning in Business Management

Data through it’s different forms being structured, semi-structured and unstructured is at the origin of the most fundamental asset for organisations that is knowledge. So this is why we really need to care about data management. Actually, all organisations allow a huge importance to it’s data and therefore data management as data is responsible of keeping digital trace of all internal and external activities that organisations develop with their different stakeholders. So, all this data need to be at a place where it can be used as the most efficient way possible. This is where Enterprise Resource Planning (ERP) comes into the mix. So let’s make sense of what ERP is all about.

What Is ERP All About?

ERP increases the efficiency of the business. It makes businesses make more money, gets employees paid on time, lets management make wiser and more informed decisions and even gets your products to your customers. So now that we know that what exactly is ERP? ERP is enterprise resource planning which is an broad term for a very complicated type of software solutions.

Let’s take out some time and introduce you to a new friend ERP and talk in detail about how it really helps your business. So you wake up one day with an idea for a new product, a good product maybe even a great product but your idea in only a couple dollars might get you a cup of tea. Is that enough? How do you make sure and get that imagination switched into a product that customers love so much they are ready to spend their dollars for it? As a first step, you start with turning your idea into a design.

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After you begin designing your product you need to understand it in the best way possible, maybe even map it out. ERP doesn’t help you with that, what ERP helps you with is to help you start making a list of all the supplies you’ll require, if you ever, at the end, want to make your product. While you go through the design process, ERP will assist you to estimate the per unit cost and how you narrow down options to price it. Hopefully, your price is more than your cost and you realize that this idea might actually be a hit. Now you want to transform that design to manufacturing. It doesn’t matter how amazing your design is customers are never giving you money for it any more than they would for the bare idea. So now you have to make your 2D idea into a 3D product.

ERP assists you here as well, it allows you to set up a supply chain, bring all the required materials at one place to develop your product. Vendors from everywhere can be built in by ERP, which is capable of sending them purchase orders for those supplies. When the materials are ordered, schedule for their shipment, delivery guidelines, payment for these supplies and lastly, their arrival and invoice can all be taken care of by our new friend ERP. These supplies can even be located in the warehouse using straight logistics, barcodes or even radio frequency, ERP will identify and take care of all that for your organisation as well. Maybe your initial idea was not to make your product but purchase it from a 3rd party distributor into a new market. ERP is flexible. It will take care of the business in the same way; tracking the raw materials inventory or already purchased goods for resale without showing any bias.

While all this building up and going ahead with your buying is going on, you’ve sent out a sales team to find customers out there who desperately want to purchase your brand-new product. Their job is to get those orders finalized. Your ERP will most certainly take care of those orders but can also keep track of the commissions and territories of every person on the sales team, and then cometh the hour cometh the day, customers seem to be over the moon eagerly kicking their heels to give your product a new place on their tables. ERP will welcome those customers in and record all their details from them. It will massively be use to you for keeping track of all their many wants and needs, including even the tiniest detail of the fact that they need your product to be customized just for them and when they say the check is on it’s you can trust their credit worthiness differently for every customer. ERP accepts their requests and will automatically check out what is required to make sure that it’s done, the time it should take and what should be charging them for those orders including all the local sales tax deductions.

If there’s a case of really huge and challenging customers than we can use a software known as EDI. ERP will guide you satisfy those demands and give you a list of the stock you have available, where the products are physically present and give your packaging team the guidelines on what to pack and put into the packages for those consumers. ERP will manage the deliver and makes sure that your product reaches the customer by filling out the paperwork. ERP also manages everything related to customs that helps your product cross national and international borders. ERP also defines the price at which the customized products should be set, raises the payments and makes automatic deposits for them.

When you yourself manufacture the products that you want to sell, ERP will convert delivery orders into broad work orders highlighting every step required for your product to become a final good. The amount of supplies required, the labour involved in each step, quality assurance processes(QA) and also which tools and machines are required in the whole manufacturing process. It will pay your staff involved in the production even by the hour if required or maybe even according to the work done or if required, a mix of both. ERP knows everything your team is aware of or has the knowledge of and make sure that employees are given the work in which they are trained for. It will track the location of which place the finished goods go and in what sense they in the end get put into shipments to fulfil orders and then sent for deliveries, same as it is with distribution.

All this attention to detail helps you to list some very good reports and statistics, so business can make itself master of everything and knows stuff with less hard-work. That’s what the business management is supposed to do, isn’t it? A live feed and visualized data of what is going on at every department in the company available, so decisions to be made are sorted and can be done on an up-to-date basis based on the information at hand. ERP will also let the business jot down your financial statements and documents for filling in taxes and delivering on your remittances. So what all can a ERP do? A lot and this is only a very small description of everything it is capable of.

Here we have been in the ERP business for a while now and we’re still finding new things that could do to make businesses better. We think we’re pretty good at it for a few reasons but first and foremost because we listen to our customers. Most of our features have been things that we have built over the course of the past experiences in response to customer requests.

Benefits of ERP Systems

Competitive Advantage: It cannot be denied that ERP software demands a lot of investment, but not making this investment can lead to an even bigger cost for you. While there are many organisations who don’t invest in ERP and rely on old tries and true methods, there are smart organisations who understand the situation and look for technology solutions. These smart organisations gain advantage over their competitors because they start extracting many benefits of the ERP which we’ll discuss further in comparison to the organisations who choose not to invest into ERP.

Improved Process Efficiency: One of the best advantages of ERP is that it makes the whole process a lot more efficient. Not only does ERP saves time but also reduces manual efforts. ERP in it’s own way reduces the human effort to enter information. ERP also streamline what is called business processes and it is easier for the you to collect data.

Accurate Forecasting: ERP systems gives a lot of benefits and another one of them is that it will give your users, and most importantly managers, the required elements you will need to make more accurate forecasts. As it is certain that the information within ERP is as close to perfect as possible, your business can decide on realistic estimates and more accurate forecasts.

Department Collaboration: No business wants their departments to not be in sync and we are sure you don’t want that in your business either. So what becomes crucial and more importantly necessary for your business is collaboration between your departments. ERP systems are consistent and centralized, and with the data entered into the ERP systems, we don’t see any reason why the departments in your business can’t work together. ERP systems also naturally promotes interdepartmental and collaborative efforts as it goes through almost all the aspects of a business.

Scalable Resource: Here’s a fun fact. Once a solution is given, ERP does not stop finding new solutions. Structured ERP systems are always working towards the addition of new functions and users to grow. There will come a time when your business will be ready to grow or maybe it will need more resources, ERP will not have a problem with that and should be able to accommodate that growth within its structure.

Integrated Information: The data in your business currently is located at different databases. This spread of data is no more an issue as with ERP all the data will he collected and stored in a single location. This opens new opportunities for your business as you can change the structure in such a way where your CRM software and ERP systems are integrated, which will make your data accurate, consistent and unique. Basically you know that you will find our details of your customers, their orders, and your inventory, all in a one place. Imagine the time you will save with integrated information.

Cost Savings: One thing we know that managers are always looking for is cost savings and we are sure you would like to save costs as well. So, ERP systems is one location of accurate, real-time information, so it reduces administration and operations costs. It will also allow you to proactively manage operations, prevents disruptions and delays, breaks up information logjams and helps users make decisions more quickly. The only thing you need to do is to choose the right solution and vendor for your business. If you successfully do that, you’re bound to see a great ROI.

Streamlined Processes: As it is said, “With great power comes great responsibility.” As you’ll grow, your operations are bound to become more and more complex. So in such a scenario, ERP will make sure that the manufacturing software automates the operations of your business in all the existing departments providing efficient, real-time information to each person who is utilizing the solution. Improved functions such as production, order completion and delivery are easily achieved as ERP increases accuracy and productivity by guiding users how to navigate complex processes and avoid re-entry of data.

Mobility: With ERP systems you will have access to a centralized database no matter from where you work.

Customized Reporting: Easier and customizable reporting is possible because of ERP systems. The best part about this is that users can themselves run and access their own reports without any help, which will save your time that you can use to do something productive for your business.

Increased Productivity: This is pretty simple as we are already aware of the fact that ERP system automates the redundant processes, your employees will have more time for themselves to work on different tasks and take more responsibility.

Regulatory Compliance: One of the most unnoticed advantage of ERP systems is that it will monitor changes in compliance under check for your organisation and will also keep track of regulations within the industry.

Flexible Systems: Our ERP system is modern which means that it is robust, flexible and configurable. It is flexible to the unique needs of a business and is not a one-size-fits-all kind of a service. It of course will adapt itself to the ever-changing demands of your growing business and will make sure that you don’t have to spend more money for a new and advanced solution to cater to the new and growing demand of your business.

Customer Service: It is evident by our report thus far that with our ERP system, it will be easier for your sales and customer service employees to provide high quality customer service. It will help them to have better interaction with customers and will significantly help them to improve relations with customers through faster and up-to-date information and history.

Data Reliability: The data provided by our ERP system is reliable and is accessible from any location through many devices like smartphones and laptops. It is able to update in real-time so it is capable to improve data consistency and accuracy. As long as security is concerned, it can be always endure firewalls and built-in protection resources.

Key Success Factors

Statistics say that 50 to 75% of implementations fail at some level. There are many factors that play a role and failed implementations including but not limited to unrealistic expectations, old methodology and planning, lack of communication, sufficient resources and inadequate knowledge transfer. We believe there are key success factors of an implementation that can make your business rise above the statistic.

Executive Support: Executive support in involvement is vital because executives are responsible for creating a vision for success motivating the project team, procuring necessary resources and making high-level decisions based on team recommendations. Define Success: Beginning your implementation with an end goal in mind is crucial to success because it gives you a firm grasp on where you are going without that you are likely to wind up nowhere in particular.

Set Priorities: Creating a foundation of core features that immediately meet your pressing needs and later expanding the applications footprint helps avoid information overload. A phased approach based on set priorities provides time for knowledge transfer to fully master the operation of the application.

Establish Budget: Establishing a budget for personnel is just as important as establishing a budget for hard costs. People are often the most critical and constrained resource in any implementation process.

Design The Team: An enthusiastic, properly resourced and well balanced team is essential. View your implementation like a challenging construction project. It is vital that you prepare your organization for change. When the team understands the overall picture and how they fit in it decreases potential insecurities and anxiety. Give them the information that they need gradually through increased communication so they are able to absorb all of the details and do not get overwhelmed.

Failures, What Went Wrong and Preventing Measures

• The Hershey Company

Overview of the company

Hershey’s was founded in 1876 by a man named Milton Hershey. After two unsuccessful confectionary ventures, Milton Hershey started a caramel company which became a hit. The company then introduced Hershey’s cocoa to the public and the Hershey’s brand was established in Pennsylvania in 1894. Chocolate was a luxury over a hundred years ago and when Hershey built his factory he made it affordable for everyone.

Hershey’s ERP Implementation

In 1996, Hershey’s decided to upgrade its legacy IT system to an integrated ERP system. It selected SAPs R/3 ERP software, manugistics supply chain management, SCM software in Seibels customer relationship management CRM software. Despite a recommended implementation time of 48 months Hershey’s demanded a 30-month turnaround so that it can curl out those systems before Y2K. Based on these scheduling demands cutover was planned for July of 1999. Unfortunately this date coincided with Hershey’s busiest periods, the time during which it would receive the bulk of its Halloween and Christmas orders. To meet the aggressive scheduling demands Hershey’s implementation team had to go with a big bang approach instead of a less risky phased approach, which would have allowed testing and correcting issues on one subsystem at a time.

ERP Failure and Impacts

Unfortunately, this implementation went wrong. When the system went live in July of 1999 unforeseen issues prevented orders from flowing through the system. As a result, Hershey’s was not able to process over a hundred million dollars’ worth of orders even though they had the inventory and stock. Product inventory started to quickly pile up and increased 25 percent more than the previous year. After Hershey’s announced that they were having issues with their new computer system, stock price fell by 8 percent in a single day.

What Went Wrong

Hershey’s implementation missteps led to substantial losses for the company and its stakeholders. Decision makers did not understand the complexity and risks involved with an undertaking of a three system ERP cut over. Apparent by their decision to ignore the recommendation for a 48 month project timeline. They were inflexible with their proposed launch date leaving little time for critical phases needed to achieve a successful BIGBANG implementation. Along with the system not being tested properly, employees also did not receive enough time to learn how to use it. Hershey’s also chose to launch during the holiday season which is one of their busiest times of the year. The probability of loss when an ERP system is first implemented is generally understood but these decisions heighten their risks further and led to its failure.

• Hewlett-Packard (HP)

Overview of the company

HP was started in 1938 as an electronic instruments company. In the 1980s HP emerged as a major player in the computer industry. In 2001 HP became the second largest computer manufacturer in the world.

The Meeting

In January 2004 Giles Bouchard the CIO and executive VP of global operations held a meeting with key operation leaders of HP. This meeting was held to create a new organizational model. It was a meeting where the new ERP system was introduced.

The Company’s Knowledge

HP’s managers knew all things that could go wrong with the ERP role up but they didn’t just plan for them all to happen at once but Giles Bouchard stated, “We had series of small problems, none of which would have been too much to handle but together they created the perfect storm.”

Employee’s Knowledge

HP insiders knew the project had huge risks despite the company’s expertise with SAP migrations. The staff suggested that some kind of backup systems should be put into place to overcome the risk failures but they were ignored by executives. Due to the company culture employees were not allowed to have much active involvement thus they were ultimately ignored. Thus, in response many employees including VPS and the ESS division left the company to join rival firms, while other employees worked in fear of being laid off by HP.

The Issue

On August 2004, HP finally announced that its revenues for the third quarter ended on July 3rd 2004. Revenues from this quarter and from its enterprise servers and storage have fallen 5% to 3.4 billion as compared to the same quarter last year.

Total Financial Impact

The total financial impact included all backlogs and loss of revenue was equal to 160 million dollars. This 160 million dollars was five times the cost of implementing the entire ERP system.

Company Blame

So when this financial impact happened, the company put the blame on the migrating to the centralized ERP systems. This migration took place in the North American divisions of HP.

Skepticism

When this failure occurred a lot of scepticism arose and HP’s credibility as a consultant for SAP ERP implementation took a big hit and HP’s primary responsibility was to prevent from happening exactly what happened to their own company. They set an example the failure to implement a successful ERP system as a company who is supposed to be a consultant for an implementation system, HP set the example for the unfavourable financial and business impacts of poor ERP implementation.

Internal Investigation: HP conducted an internal investigation to dive deeper and find the true root of the failure of the ERP project. The report revealed that the main problem did not actually relate to the SAP software but rather was due to the performance related issues. It was found that the technical glitches were small but the contingency planning for ERP project implementation left many issues unanswered.

What Went Wrong

Looking back HP now point out four key problems that that led to the unsuccessful ERP implementation- a) project team constitution b) data integration problems c) poor planning and improper testing d) demand forecasting problems.

a) Project Team Constitution: Difficulties arose in the program management due to the high level of dependency among the teams. There were problems of communication between various groups. For example, the communication flow between back-end logistics groups and the front end group could not be maintained.

b) Data Integration Problems: Problem surface between the previous system and the SAP system being implemented as soon as implementations went live. Lack of effective product training and improper data management were present as the main causes of the problems.

c) Poor Planning and Improper Testing: In retrospect the company officials thought that the pre implementation preparation activities were not planned properly. The executives will even admit that the system had been tested for standardized orders but not properly tested for customized works.

d) Demand Forecasting Problems: The forecasting could not predict the actual demand for customized server products which turned out to actually be 35 percent higher than the standardized servers as mentioned previously that the testing was not accurate to what they had expected the outcome to be. So as Gilles Bouchard said, “All these problems were knowledge to the team but when all the rows together the ERP system had no chance at success against the perfect storm. In conclusion, HP concluded that the data modelling problems between the newest SAP software and the system involved were minimal. Ultimately, it did not hold SAP responsible for the failure but rather the own company’s performance related issues.

• Avon

Overview of the company

Avon Products established on 27th January, 1916, is into marketing and manufacturing of beauty and related products. The company is operated and present in many geographic locations which include Europe, South Latin America, Middle & East Africa, North Latin America and Asia Pacific. The product categories for Avon are Beauty, Fashion and Home. What Beauty includes off at Avon is skincare, fragrance and colour (cosmetics). Fashion and Home on the other hand, includes fashion jewellery, watches, apparel, footwear, accessories, gifts and decorative products, housewares, entertainment and leisure products, children’s products and nutritional products. An important characteristic about Avon is that it sells its products to customers primarily through direct-selling channel.

Avon’s ERP Implementation Failure

Avon, on 9th December 2013, gave an official statement that it is writing off the $125 million SAP which they had undertaken to rollout their SMT (Service Model Transformation) program. The company stated, “SMT was piloted in Canada, causing significant business disruption in that market, and did not show a clear return on investment. This decision to halt the further roll-out of SMT was made in light of the potential risk of further disruption.”

This project had a significant business scope which included campaign management, order capture, order fulfilment, field management and finance. The technology heavy project was undertaken to enable the business transformation and also included its Customer Interaction Centre into the scheme of things. For them, this decision made a lot of sense as it sat perfectly in their short term economics. As this investment was a viable asset of the company as the $125M were invested in software and capitalized labour, so the financial depreciation was mostly set to start soon for this asset.

What Went Wrong

Could all of this have been avoided? Maybe, but the stakes were pulled up against the project team. Consider:

• The leadership of the management of Avon and the transformation efforts were all changed in the last year or so. This program was slowly becoming the chain around their hands and not the kind of business they had hoped for.
• The company, in its Brazilian operations, had already struggled to implement Oracle App and had to deal with a similar sort of a representative attrition with a fussy implementation.
• The representatives that sell the Avon product line are not your typical users that can be told what to do. These are all mostly part time employees that need to pay for their materials and supplies. Waiting for 60 minutes on a help line to just place a simple order is bound to get them to walk.
• Any program, if it takes 4 years to completely realise that it needs deployment is too large. It is unacceptable that it should take 4 years to discover that a system is not helping. The company and is not usable.

Measures To Prevent The Occurrence Of Failures Discussed Above

• The Hershey’s Company

The knowledge and information gap between Hershey’s decision-makers in the IT professionals implementing the ERP system needed to be better bridged. Since Hershey’s ERP implementation was a seemingly rash choice a recommended change would have been for Hershey’s to seek a consultant. This would be someone experienced in ERP implementation and who could be trusted to support the company and make informed decisions on their behalf with reasonable expectations in mind. Hershey’s should have approached this in a way that they research and choose a cut over time during an offseason when risks of loss would be lowest. The project timeline should also include ample time for system testing and training including frequent interdepartmental meetings to discuss the system and to help resolve workflow challenges. Additionally, Hershey’s should be aware about the risky nature of the BIGBANG strategy the likely hurdles with this sort of transition and should do aggressive testing on the launch date.

• Hewlett-Packard (HP)

HP made the most basic mistakes which cost them in their ERP implementation. Any company needs to plan for issues and problems for any ERP project or otherwise. Even the CIO Bouchard went ahead and told that HP should have made a “contingency plan for four, five or six weeks,” this statement clearly indicates that HP was not prepared of what was coming ahead of them and was not able to cope up with the build of problems mixed with an increased demand for their products in the same frame of time. What HP should have done is to give more time to the ERP implementation and approached the whole process in a more proactive manner.

• Avon

ERP can boost how much ever it wants to about how functional it is and how magical the modules and applications are that you can use to make sure that your business processes becomes easier, but all of it won’t matter even a little bit if the system is not actually usable. It all comes down to the fact that ERP is all about the amalgamation of the software with your business processes, and if you are not able to find the right staff to use the ERP you’ve invested in, it will become difficult to carry out the business processes essential to keep your organisation running.

Avon should have made sure that it’s employees were rightly trained so that they were ready for the transition into the new system, more than just being ready, they were willing to do the transition and prefer to use the ERP system over the old process in the first place

Webliography:

1. https://www.workwisellc.com/blog/15-benefits-implementing-erp-software/
2. https://www.reuters.com/finance/stocks/company-profile/AVP
3. https://upperedge.com/sap/avon-to-sap-we-cant-put-enough-lipstick-on-this-pig-a-failure-in-program-risk-management/
4. https://blog.datixinc.com/blog/erp-failure-stories
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